Under fair-value accounting for an equity investment, which of the following statements is false? a. An...
Under fair-value accounting for an equity investment, which of the following statements is false?
a. An entity may choose the fair value election for an equity investment only if it is irrevocable.
b. Under the fair value option, changes in fair value are recorded in earnings.
c. Under the fair value option, the Investment account would be adjusted for the change in fair value.
d. Under the fair value option, the entity would reduce the investment account for its share of dividends received from the investee.
Homework Answers
The false statement is Option D. Under the fair value option, the entity would reduce the investment account for its share of dividends received from the investee.
Under Fair Value accounting, when the dividend is received from the investment it is recorded as income.
It is an Equity method where the dividends received are treated as return of capital and reduce the carrying value of the investment.
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